An LLC is unique because it is the only type of business entity where the owners can choose its tax treatment, or how the IRS treats the business for federal tax purposes. What the business owners choose will ultimately affect which tax rules they abide by and how they prepare their tax return. With that said, however, filing an LLC tax return always follows the same basic process, regardless of classification.
Are you a small business owner with an LLC? Here is a look at some fundamentals to consider when preparing your tax return for your small business.
You must know your tax election.
Again, LLC owners must elect how they will be treated for federal tax purposes. A single-member LLC, for example, might choose to be taxed as a sole proprietorship or a corporation. A multi-member LLC, meanwhile, may choose to be taxed as a partnership or a corporation. A professional small business accountant can help you locate this information if needed. Essentially, it is found on a confirmation letter from the IRS that indicates your LLC’s tax election.
Certain tax forms will correspond to your tax election.
Which tax form you are required to file depends on your tax election. If you chose to be taxed as a sole proprietorship, for example, you must record all income and expenses on Schedule C of your individual tax return (form 1040). If your LLC is taxed as a partnership, you must file a form 1065. An LLC that is taxed as a corporation must file a form 1120.
You must pay estimated taxes and self-employment taxes.
You may not be subject to tax withholding as a small business owner, but you do need to pay estimated taxes and self-employment taxes to the IRS and your state tax office quarterly. We at Klingler CPA in Utah can help you calculate and prepare these quarterly payments—as well as offer the bookkeeping services necessary for this process.
You are subject to certain state taxes.
LLC business owners are subject to certain state taxes, which may vary by state. Some states, for example, charge a tax on income earned by that LLC, on top of income tax. Other states charge an annual LLC fee called a franchise tax, registration tax, or renewal fee. You small business accountant can help you understand the specific laws in your state.
We can offer filing assistance.
Do you need help filing taxes for your small business this year? We are proud to offer small businesses in Utah professional tax planning services and Utah income tax preparation. We understand that paying more than your fair share of taxes can hinder your growth as a company, so we strive to help you maximize your LLC’s deductions and credits. We also offer free auditing services to each of our customers, meaning if your tax return is selected for audit, we will support you throughout the process. Our licensed and experienced tax professionals are ready and eager to help relieve your tax burden, so give us a call today.